Bloomberg:
- China’s Swelling Local Debt Adds Urgency to Xi Fiscal Repair Job. China’s local-government debt
swelled to 17.9 trillion yuan ($2.95 trillion), underscoring
risks to the financial system as President Xi Jinping rolls out
economic reforms. Debt including contingent liabilities rose about 13 percent
in the six months through June, based on figures in a report by
the National Audit Office, posted on its website yesterday. That
followed a 48 percent increase over the previous two years. China’s borrowing spree in recent years has evoked
comparisons to debt surges that tipped Asian nations into crisis
in the late 1990s and preceded Japan’s lost decades. The audit
result adds pressure for Xi, yesterday named head of a Communist
Party leading group for reform, to repair a fiscal system that
starves local governments of tax revenue.
- China Says Abe Closed Door to Meetings After Visiting Shrine.
China ruled out talking to Japanese Prime Minister Shinzo Abe, saying
he “closed the door” to any meetings with Chinese leaders after visiting
a site that memorializes fallen Japanese soldiers including war
criminals. “Chinese people don’t welcome him,” Foreign Ministry
spokesman Qin Gang said at a briefing in Beijing today. “What
Abe needs to do now is confess his mistakes to the Chinese
government and the Chinese people.”
- Europe Stocks Decline.
Swatch Group AG, the world’s largest watchmaker, lost 0.8
percent after a fire caused damage at one of its workshops.
International Personal Finance Plc (IPF) rallied 10 percent after Numis
Securities Ltd. recommended buying the stock following a 26 percent drop
in the past two days. Vedanta Resources Plc increased 4 percent after
its Sesa Sterlite Ltd. won approval to restart its iron-ore mines in
Karnataka, India. The Stoxx 600 slipped 0.2 percent to 327.13 at the close of trading in London.
- Natural Gas Advances on Forecasts for Cold Start to New Year.
Natural gas advanced in New York on speculation that an unusually cold
start to the new year will stoke demand for the heating fuel. Gas gained
as much as 2.4 percent as Commodity Weather Group LLC predicted a
push of below-normal temperatures into the Northeast, Midwest and South
through Jan. 8. The high in New York City on Jan. 3 will be 18 degrees
Fahrenheit (minus 8 Celsius), 21 below normal, according to AccuWeather Inc. The low in Chicago on Jan. 2 will drop to 6 degrees, 13 below normal, and Dallas will be 31 degrees, 6 lower than average, according to AccuWeather in State College, Pennsylvania.
Wall Street Journal:
- Second Blast in Russia Stokes Olympic Security Fears. Suicide Bombing Is Volgograd's Second Within 24 Hours.
A suicide bomber struck in the southwest
Russian city of Volgograd on Monday morning, killing at least 14 people
aboard a crowded trolley bus in the city's second terrorist attack in
less than 24 hours, stoking security fears in the country ahead of the
Winter Olympics. Russian President Vladimir Putin ordered security to be
tightened around the country after the second attack, which comes less
than six weeks before the games are set
to start in the Black Sea resort of Sochi. The repeated attacks, and
risk of additional violence, threaten to tarnish an event on which Mr.
Putin has staked his personal pride and spent $50 billion to stage.
- Chinese Funds Look to Hedge Their Bets. Chinese
funds focused on the nation's domestic stocks are increasingly looking
to hedge their bets. While short selling, or betting that a stock's
price will fall, remains uncommon in China because of the high cost of
borrowing stocks, hedge funds are using CSI-300 index futures and other
methods to limit their risk. And fund managers say they expect
regulators to roll out more products that will allow them to better
hedge in the future. "More and more [local] funds are using hedging
strategies" to protect themselves during market declines, said
Martin Bao,
assistant portfolio manager at Shanghai-based Broadvision Investment
Management.
Fox News:
- 'Stuck in our own experiment': Leader of trapped team insists polar ice is melting. The leader of a scientific expedition whose ship remains stranded in
Antarctic ice says the team, which set out to prove climate change, is
"stuck in our own experiment." But Chris Turney, a professor of climate change at Australia’s
University of New South Wales, said it was “silly” to suggest he and 73
others aboard the MV Akademic Shokalskiy were trapped in ice they’d
sought to prove had melted. He remained adamant that sea ice is melting,
even as the boat remained trapped in frozen seas.
- Drones, placentas and transgender students: New laws in 2014 cover much ground. You may have heard that Colorado residents will be able to legally buy pot next year. But did you know that in Oregon, mothers will be able to take their
placentas home after giving birth? And in Illinois, it will be illegal
for police to use a surveillance drone in most cases without a warrant. These are just a few of the thousands of new laws and regulations going into effect next year -- mostly on Wednesday.
CNBC:
ZeroHedge:
Business Insider:
Forbes:
IBD:
Reuters:
Bild:
-
Schaeuble
Says Low-Rate Policies Can't Last Forever. German Finance Minister
Wolfgang Schaeuble in Bild-Zeitung interview says "low-interest rate
policies of the central banks can't last forever." Schaeuble says
expansive monetary polices lead to problems for long-term investments.
Xinhua:
- China to Keep Child Policy, Birth Level Stable. China will keep
child policy stable and ensure that birth level won't be volatile,
citing a statement from the State Council on improving child policy.
China will seek to manage the imbalance proportion of newborns' gender
and strictly control births thta aren't in accordance with policy.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -.83% 2) Coal -.78% 3) Energy -.53%
Stocks Falling on Unusual Volume:
- TWTR, MYGN, NOAH, NMM, IEP, OILT, CSV, VISN, LNG, PKX, MSB, NM, BMA, SEAS, OKS, TYL, MONT, ACOR, SODA, STMP, SALE, PINC, ESI, HAR, PCLN and CLMT
Stocks With Unusual Put Option Activity:
- 1) CTB 2) LLY 3) TIF 4) X 5) WHR
Stocks With Most Negative News Mentions:
- 1) MYGN 2) NFLX 3) HD 4) WFC 5) SBUX
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +.93% 2) Networking +.58% 3) Hospitals +.47%
Stocks Rising on Unusual Volume:
- KNDI, CROX, ORMP, ICLD, INVN, NQ and KRO
Stocks With Unusual Call Option Activity:
- 1) CROX 2) INVN 3) SYMC 4) GALE 5) DTV
Stocks With Most Positive News Mentions:
- 1) AAPL 2) TWTR 3) FB 4) WFC 5) BX
Charts:
Weekend Headlines
Bloomberg:
- China’s Media Condemns Abe as Boycott Calls Grow on Weibo. Japanese Prime Minister Shinzo Abe’s
visit to a war shrine drew condemnation from China’s state media
as Chinese consumers took to social media to call for a boycott
of Japan’s goods. “Japan has no future if it continues on its revisionist
path,” the People’s Daily, the Communist Party mouthpiece, said
in an editorial yesterday. The Global Times called for Abe and
senior Japanese government officials who visited the Yasukuni
Shrine in Tokyo to be barred from China. The China Daily said
the pilgrimage was an “intolerable insult” and called for the
country to reconsider the relationship with Japan in terms of
security, diplomacy and the economy. An Internet survey on the Sina Weibo microblog service had
respondents voting about three-to-one in support of a boycott of
Japanese products. User comments include people urging a tougher
stance against Japan to owners of Japanese-brand cars musing
about the need to put up patriotic slogans to avoid vandalism.
- Record
Money Rate Set to Last on $18 Trillion Debt: China Credit. China's
benchmark money-market rate will probably stay near a record in the
coming quarter as policy makers seek to cut overall debt that a
state-run researcher estimates has topped $18 trillion. The seven-day
repurchase rate will average 4.5%, according to the median estimate of
11 analysts and traders in a Bloomberg survey. That's near the
unprecedented 4.65% in the three months that started Oct. 1, and up from
3.2% in the first quarter. The average LIBOR for borrowing dollars for a
week was .13% on Dec. 24. China needs to deleverage because total
liabilities in the world's second-largest economy reached 111.6 trillion
yuan($18.4 trillion) in 2012 and accounted for 215% of GDP, Li Yang,
vice president of the Chinese Academy of Social Sciences government
think tank, wrote in an article published in Shanghai Securities News
last week.
- China Warns Officials on Terror Attacks as Xi Shows Frugality. Chinese officials and police have
been told to step up safety precautions in “key regions” and
be on alert for terrorist attacks during the New Year and Spring
Festival holidays amid ethnic tensions in Xinjiang. The order was given in a circular issued by the Communist
Party Central Committee and the State Council, the Xinhua News
Agency reported on Dec. 27. The document also reminded officials
to avoid extravagance and reiterated a ban on the use of public
funds for gift giving and entertainment.
- China Cash-for-Votes Scandal Shows Xi’s Graft Challenge.
A cash-for-votes scandal in China’s southern city of Hengyang that
snared more than 500 lawmakers underscores the challenges facing Xi
Jinping as he enters his second year in charge of the world’s
second-biggest economy. The unprecedented electoral fraud, which led to the
resignations of almost the entire city People’s Congress, was
disclosed on Dec. 28, less than a week after the ruling
Communist Party issued a new plan to fight corruption and
described the situation as “critical and complicated.”
- Abe Ends Year on Flagging Support, Needs Unified Cabinet.
Japanese Prime Minister Shinzo Abe
this month completed a year in office with public support
falling to the lowest yet. Abe’s fortunes next year will ride in
part on the ability of his top spokesman to keep the cabinet
unified as the government pushes economic and military reform.
- Asian Stocks Rise on Japan; Aussie Slips While Gas Gains.
Asian stocks climbed, with Japan’s Nikkei 225 Stock Average poised for
its biggest annual gain since 1972, as the yen touched a five-year low
versus the dollar. Australia’s currency dropped, while natural gas rose.
The MSCI Asia Pacific Index added 0.2 percent by 12:01 p.m.
in Tokyo, gaining for a 10th day, as the Nikkei 225 rose 0.4
percent.
- Rubber Falls, Extending Annual Decline as China Inventory Rises.
Rubber futures fell in Tokyo, heading for a yearly loss, as growing
stockpiles in China increased concern that demand may slow in the
biggest buyer of the commodity used in tires. The contract for delivery
in June on the Tokyo Commodity Exchange lost as much as 1 percent to
274.5 yen a kilogram ($2,605 a metric ton) before trading at 275.7 yen
at 11:51 a.m. local time. Futures gained 2 percent this month while
dropping 8.9 percent during volatile trading in 2013 that saw the
material slump into a bear market in April and bounce back into a bull
market in August.
- Rebar Climbs as Ore Prices Gain on Australian Supply Concern. Steel reinforcement-bar futures rose
for a third day in Shanghai as prices of raw-material iron ore advanced on concern that Australian supplies will be disrupted. Rebar for May delivery on the Shanghai Futures Exchange gained as much as 0.4 percent to 3,628 yuan ($598) a metric ton
and traded at 3,616 yuan at 10:03 a.m. local time.
- Turkey’s Economic Vulnerability Exposed as Graft Divides. Turkey’s
Prime Minister Recep Tayyip Erdogan enters the last week of 2013
reeling from a corruption probe that has splintered his party and
highlighted economic vulnerabilities as investors unload the nation’s
risk. Erdogan took his defense of his administration to the road
over the weekend, addressing supporters at six election rallies and
lashing out at prosecutors heading the graft investigation, which his
Finance Minister Mehmet Simsek called a “soft coup.”
Flyers for the ruling Justice and Development, or AK Party, say
it’s in a “struggle for liberation” as it seeks a fourth term
in power amid ambitions to lead the country to 2023.
- Draghi Sees No ‘Immediate’ Need for More Rate Cuts, Spiegel Says.
European Central Bank President Mario Draghi sees no need for further
cuts to the institution’s benchmark rate amid “encouraging signs” that
the euro crisis may be resolved, Der Spiegel reported, citing an
interview. “At the moment we see no immediate need to act” on the main refinancing rate, the magazine cited Draghi as saying.
“The crisis isn’t over, but there are many encouraging signs.”
- Volcker Rule Treatment of TruPS-Backed CDOs Getting U.S. Review. U.S. regulators said they are
reviewing whether it would be “appropriate and consistent”
with the Volcker Rule to allow exemption of some collateralized debt obligations backed by trust-preferred securities. The Federal Reserve, Federal Deposit Insurance Corp., Securities and Exchange Commission and Office of the Comptroller
of the Currency will address the matter by Jan. 15, the agencies
said in a statement yesterday.
Wall Street Journal:
- Google(GOOG), Apple(AAPL) Forge Auto Ties. Consumer Electronics Show to Spotlight In-Car Digital Race.
Technology giants Google Inc. and Apple Inc. are about to expand their
battle for digital supremacy to a new front: the automobile. Next week
at the Consumer Electronics Show in Las Vegas, Google and German auto
maker Audi AG NSU.XE 0.00% plan to announcethat they are working
together to develop in-car
entertainment and information systems that are based on Google's
Android software, people familiar with the matter said.
- Reimbursement for Breast-Cancer Risk Test to Be Cut.
The rate cut goes into effect on Jan. 1, 2014, with consequences for
genetic-testing companies, particularly Myriad Genetics Inc.(MYGN), the
dominant supplier of screenings for mutations in the genes known as
BRCA1 and BRCA2. Medicare will pay a maximum of $1,440 for the
BRCA test, a 48.5% decline from the rate of $2,795 it paid in 2013,
according to a notice published Friday afternoon on the website of the
Centers for Medicare and Medicaid Services.
- Saudis Pledge $3 Billion to Support Lebanon's Army. Grant Seeks to Bolster Armed Forces Against Iranian-Backed Hezbollah. Saudi Arabia pledged $3 billion to bolster
Lebanon's armed forces, in a challenge to the Iranian-allied Hezbollah
militia's decadeslong status as Lebanon's main power broker and security
force. Lebanese President
Michel Sleiman
revealed the Saudi gift on Lebanese national television Sunday,
calling it the largest aid package ever to the country's defense bodies.
The Saudi pledge compares with Lebanon's 2012 defense budget, which the
Stockholm International Peace Research Institute put at $1.7 billion.
- Patients Cram In Tests Before Health-Law Start. Some Top Hospitals and Experts Are Left Out of 2014 Plans Under Health Law. Thousands of people are cramming in tests,
elective procedures and specialist visits before year's end, seeking out
top research hospitals and physician groups that will be left out of
some 2014 insurance plans under the new health law, health-care
providers say. Many insurers offering
plans under the law are slimming down their networks of doctors and
hospitals in a bid to lower the cost of policies, which begin coverage
Wednesday. Health insurers are
especially focused on paring academic teaching and research hospitals
from their networks because they generally charge more than community
hospitals for similar services.
- A Large New Tax on Small Business. The latest ObamaCare levy takes effect Jan. 1.
ObamaCare
includes so many taxes that it's hard to keep track, but one of the
worst takes effect on Jan. 1. This beaut is a levy on health insurance
premiums that targets the small business and individual markets. At
$8 billion in 2014 and $101 billion over the next decade, the insurance
tax is larger than ObamaCare's taxes on medical devices and
prescription drugs combined. The Internal Revenue Service classifies the
tax as a "fee" but it functions like an excise tax on premiums. The IRS
collects an annual flat amount specified by the Affordable Care Act to be allocated among the insurers according to market share.
Fox News:
- 'Completely false': Sources on ground in Benghazi challenge NYT report. Fifteen months after the Sept. 11 attack in Benghazi which killed
Ambassador Chris Stevens and three other Americans, the narrative of the
attack continues to be shaped, and reshaped, by politicians and the
press. But a New York Times report published over the weekend has angered
sources who were on the ground that night. Those sources, who continue
to face threats of losing their jobs, sharply challenged the Times’
findings that there was no involvement from Al Qaeda or any other
international terror group and that an anti-Islam film played a role in
inciting the initial wave of attacks. “It was a coordinated attack. It is completely false to say anything
else. … It is completely a lie,” one witness to the attack told Fox
News. The controversial Times report has stirred a community that normally
remains out of sight and wrestles with how to reveal the truth, without
revealing classified information.
CNBC:
Business Insider:
New York Times:
- Markets on Edge as China Moves to Curb Risky Lending.
China’s financial system is in danger of becoming too big to bail out.
Official bank lending has more than doubled since the global
financial
crisis, growing nearly twice as fast as the overall economy. The even
bigger problem, however, appears to come from the rise of a shadow
banking system that has allowed a number of companies and individuals,
often with political connections, to borrow from state-controlled banks
at low interest rates and relend the money at much higher rates to
private businesses desperate for credit at almost any price.
Weekly Standard:
- Times Ignores Evidence of Al Qaeda Link to Benghazi. Contradicts previous reporting from the New York TImes. While much of Kirkpatrick’s reporting is admirable and while these
details add to our knowledge of certain aspects of the attack, they do
not tell the whole story. And that’s where the piece ultimately fails.
The Blaze:
- Ex-CIA Analyst Absolutely Rips NYT Benghazi Report. A former analyst for the CIA skewered the New York Times’ bombshell
report on Benghazi Saturday, contending that it was a “politicized
article” aimed at harming the GOP. “I thought it was a politicized article,” Fred Fleitz told Fox News. “It
tries to say that Anwar al-Sharia — that the Republican attempts to tie
that to terrorism is a stretch, when even CNN says they’re at least
sympathetic to Al Qaeda.”
Telegraph:
- Eurozone 'sleepwalking into a decades-long deflation trap’. World's largest bond fund Pimco says falling prices are the biggest risk to
the currency bloc in the new year. The eurozone is “sleepwalking” its way towards a Japanese-style deflationary
trap that could last decades, the world’s largest bond fund has warned.
Welt am Sonntag:
- Merkel Adviser Says Germany May Revert Back to 'Sick Man'.
Germany took steps this yr to become "sick man of Europe" again and many
European countries are already more attractive for investment, citing
Christoph Schmidt, head of Chancellor Angela Merkel's council of
economic advisers. Germany pursuing switch to renewable energies by
itself threatens competitiveness of its cos, citing Schmidt. Germany
pursuing switch to renewable energies by itself threatens
competitiveness of its companies, he said. Schmidt rejects CDU/SPD
coalition plans to introduce minimum wage, expand welfare spending
without freeing funds elsewhere. Germany stalling on own reforms will
harm its credibility and negotiating position in combating euro crisis.
Bild:
- Bundesbank's
Weidmann Says Euro Crisis May Return. While euro area is currently "in
rehab," calm in financial markets may be deceiving, citing Bundesbank
President Jens Weidmann. Euro countries need to stay on reform course;
framework for solid state finances must be strengthened; financial
markets/banks must be better regulated/supervised, citing Weidmann.
Prolonged periods of low interest rates can lead to governments delaying
necessary reforms, or to banks/companies without sustainable business
models being kept alive artificially, Weidmann said. Periods of low
interest rates can also lead to speculation about bubbles, for example
in real-estate, citing Weidmann.
El Pais:
- Spain Govt Needs to Carry Out More Reforms, Trichet Says. Spain needs to carry out more reforms as it still has problems to fix, former ECB President Jean-Claude Trichet says in an interview. Reforms carried out in Spain aren't enough, he said. The global crisis isn't over and the epicenter remains in Europe, Trichet said.
Weekend Recommendations
Barron's:
- Bullish commentary on (KO), (WEN), (LORL) and (CKEC).
- Bearish commentary on (EA).
Night Trading
- Asian indices are unch. to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 127.50 +2.5 basis points.
- Asia Pacific Sovereign CDS Index 103.25 +.5 basis point.
- NASDAQ 100 futures +.05%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- Pending Home Sales for November are estimated to rise +1.0% versus a -.6% decline in October.
10:30 am EST
- Dallas Fed Manufacturing Activity for Dec. is estimated to rise to 2.0 versus 1.9 in November.
Upcoming Splits
Other Potential Market Movers
- The German retail sales report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial
shares in the region. I expect US stocks to open modestly higher and
to weaken into the afternoon, finishing mixed. The Portfolio is 50%
net long heading into the week.
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week mixed as rising long-term rates, rising energy prices, technical selling
and increasing emerging markets debt angst offsets seasonality,
investor performance angst, fund inflows and short-covering. My
intermediate-term trading indicators are giving neutral signals and the
Portfolio is 50% net long heading into the week.
